Juno Outdoor Products manufactures four different types of sleeping bags. Last year, Juno generated netoperating income of $1,000. The following information was taken from last year's income statement segmentedby product (brackets indicate a negative amount):Contribution margin $Segment marginArcticAllocated common $ 10,000fixed expensesO Arctic and Desert(2,000)$ (16,000)Segment margin less $ (26,000)allocated commonfixed expensesArcticO no bags should be discontinuedO Arctic and BackyardArctic Desert, and BackyardDesert$ 45,000$5,000$ 10,000$ (5,000)Backyard$ 35,000$ (8,000)$ 10,000$ (18,000)Indoor$ 80,000Juno expects similar operating results for the upcoming year. If Juno wants to maximize its profitability in theupcoming year, which sleeping bag or bags should Juno discontinue?$ 60,000$ 10,000$ 50,000

Contribution margin is the difference between the sales revenue and variable cost. Segment margin is…

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Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter2: Basic Managerial Accounting Concepts

Section: Chapter Questions

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Question

Juno Outdoor Products manufactures four different types of sleeping bags. Last year, Juno generated net
operating income of $1,000. The following information was taken from last year's income statement segmented
by product (brackets indicate a negative amount):
Contribution margin $
Segment margin
Arctic
Allocated common $ 10,000
fixed expenses
O Arctic and Desert
(2,000)
$ (16,000)
Segment margin less $ (26,000)
allocated common
fixed expenses
Arctic
O no bags should be discontinued
O Arctic and Backyard
Arctic Desert, and Backyard
Desert
$ 45,000
$
5,000
$ 10,000
$ (5,000)
Backyard
$ 35,000
$ (8,000)
$ 10,000
$ (18,000)
Indoor
$ 80,000
Juno expects similar operating results for the upcoming year. If Juno wants to maximize its profitability in the
upcoming year, which sleeping bag or bags should Juno discontinue?
$ 60,000
$ 10,000
$ 50,000

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